Answer:
He must invest R297 521 today.
Step-by-step explanation:
The compound interest formula is given by:
[tex]A(t) = P(1 + \frac{r}{n})^{nt}[/tex]
Where A(t) is the amount of money after t years, P is the principal(the initial sum of money), r is the interest rate(as a decimal value), n is the number of times that interest is compounded per year and t is the time in years for which the money is invested or borrowed.
Banabas must pay his ex-wife an amount of R350 000 in two years’ time.
This means that [tex]t = 2, A(t) = 350000[/tex]
Interest rate of 8.15% per annum compounded monthly:
This means that [tex]r = 0.0815, n = 12[/tex].
Amount he must invest today:
This is P. So
[tex]A(t) = P(1 + \frac{r}{n})^{nt}[/tex]
[tex]350000= P(1 + \frac{0.0815}{12})^{2*12}[/tex]
[tex]P = \frac{350000}{(1 + \frac{0.0815}{12})^{2*12}}[/tex]
[tex]P = 297521[/tex]
He must invest R297 521 today.
